Home-buying filter: How do we determine a fair share of equity?
March 30, 2014 2:09 PM Subscribe
How do you split equity in a new home between friends when one is contributing cash and the other grants?
posted by Dalton to Home & Garden (11 answers total) 2 users marked this as a favorite
Asking for a friend:
"I'm co-buying a home in Baltimore City with a friend and will soon draft up a legal ownership agreement. We are trying to work towards 50/50 equity in the house. We each bring something different to the partnership: my friend has access to a $27,000 homeownership incentive grant and I have access to an $11,000 grant plus $10,000 cash-in-hand saved up ($21,000 total). Our combined grants will cover the down payment/closing costs and my extra $10,000 cash-in-hand will go in a joint bank account for home maintenance, improvements, emergencies, etc.
My friend argues that I will have to contribute $6,000 more to match her $27,000 grant and to truly attain 50/50 equity in the home. This means that I will have put $17,000 personal cash towards the home, while my friend put in $0 personal cash.
So here are my questions: Is money received through a grant and cash-in-hand an exact $1:$1 ratio when considering equity? Or, should they be weighted differently? Is my friend's logic sound?"